STAMFORD, Conn., April 12, 2012 /PRNewswire/ -- Information Services Group (ISG) III, a leading technology insights, market intelligence and advisory services company, today released TPI Index data showing that the value and number of outsourcing contracts awarded globally dropped during the first three months of the year in a familiar pattern of market cooling following two robust quarters in a row.

The 1Q12 Global TPI Index, which covers commercial outsourcing contracts valued at $25 million or more, measured total contract value (TCV) of $18.7 billion, a decline of 22 percent from the same quarter a year ago and 35 percent from the previous quarter. The 184 contract awards during the first quarter represented a drop of 31 percent year-over-year and 18 percent sequentially.

A key factor affecting the market's first-quarter performance was the presence of only one mega-deal, defined as a contract with TCV of $1 billion or more. However, the market awarded seven mega-relationships, contracts with average annual TCV of at least $100 million. Furthermore, TCV from restructurings, which accounted for most of the mega-relationships, rose 82 percent year-over-year.

The weak first quarter comes on the heels of a record second half for the outsourcing market. In the last six months of 2011, global TCV rose 29 percent year-over-year to a record $55.8 billion.

"This first-quarter slowdown follows the strongest half for outsourcing in a decade, making for difficult comparisons," said John Keppel, Partner & President, Research and Managed Services, ISG. "We saw this same hangover effect in early 2010 as well as in early 2006. So there is historical precedent for the industry taking a breather after two robust periods."

The TPI Index, presented by ISG, provides a quarterly snapshot of the sourcing industry for clients, service providers, analysts and the media. Now in its 38th consecutive quarter, it is the industry's authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider metrics.

The 1Q12 Global TPI Index showed first-quarter declines in both IT outsourcing (ITO) and business process outsourcing (BPO). With weakness in all functional areas, ITO TCV fell 20 percent year-over-year and 37 percent sequentially. In BPO, TCV dropped 27 percent year-over-year and 30 percent sequentially despite an uptick in activity in Finance & Accounting, Contact Centers and Procurement.

By region, the Americas turned in the best quarterly performance. Bolstered by the global market's lone mega-deal, Americas TCV during the quarter was flat year-over-year and up 8 percent sequentially. Europe, the Middle East & Africa (EMEA) slowed significantly, due in part to uncertainty stemming from fiscal concerns in the Eurozone. First-quarter TCV in EMEA fell 32 percent year-over-year and 53 percent sequentially. Asia Pacific TCV fell 36 percent year-over-year and 33 percent sequentially.

An ISG analysis of historic market data found the number of outsourcing transactions has increased dramatically over time even as the average duration of contracts has declined. As a result, contract expirations are now occurring at twice the rate they did five years ago, and they now account for a larger share of TCV awarded in every region of the world. TPI Index data show a record 570 outsourcing contracts worth at least $25 million were scheduled to expire in 2011, and record contract expirations are expected again this year.

ISG anticipates the number of contracts restructured will rise 20 percent in 2012, the third time in four years it has grown at that pace, while the value of restructured contracts should rise 10 percent.

Said Keppel: "Looking ahead, we foresee a soft first half and a reviving second half to 2012, mainly because of the impact of an anticipated upswing in restructuring performance in the second half of this year."

ISG will discuss the 1Q12 Global TPI Index during a conference call for media and analysts today at 11:00 a.m. Eastern. For more information, including dial-in instructions, audio replays and presentation slides, please visit http://www.isg-one.com/web/research-insights/tpi-index/.

About Information Services Group

Information Services Group (ISG) III is a leading technology insights, market intelligence and advisory services company, serving more than 500 clients around the world to help them achieve operational excellence. ISG supports private and public sector organizations to transform and optimize their operational environments through research, benchmarking, consulting and managed services, with a focus on information technology, business process transformation, program management services and enterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, the deepest data source in the industry, and more than five decades of experience of global leadership in information and advisory services. Based in Stamford, Conn., the company has more than 700 employees and operates in 21 countries. For additional information, visit www.isg-one.com.

SOURCE Information Services Group (ISG)